Alinta Energy has confirmed it has been approached by the Turnbull government and is interested in purchasing AGL’s ageing Liddell coal-fired power plant immediately with a view to extending its life for five to seven years.
In a statement on Tuesday AGL said it will consider a formal offer when it is made but cast doubt on the plan by noting it needs power from Liddell up until 2022 then plans to repurpose its components.
Alinta chief executive, Jeff Dimery, has suggested this objection could be overcome by offering to sell power back to AGL until that date.
The Coalition plan to extend the life of the coal power plant beyond its slated closure in 2022 was revealed after the emergence on Tuesday of a lobby group of 20 Coalition MPs who call themselves the Monash Group who are calling for more support for coal power.
The former deputy prime minister Barnaby Joyce has confirmed he is a member of the group, the core of which is conservatives Craig Kelly, Tony Abbott, Eric Abetz and Kevin Andrews.
AGL has so far resisted Turnbull government pressure to sell Liddell and plans to replace it with renewables, batteries, gas power, upgraded coal power and demand response.
Dimery said his company had “been approached about our interest in buying and running Liddell for five to seven years past AGL’s current closure date of 2022”.
“We are open to that proposal; it fits with our strong desire to maintain reliability and affordability for customers as we transition to a lower-emissions energy sector,” he said.
“Businesses are anxious about the impact the closure of a bigger station like Liddell could have on them – and we are sympathetic to those concerns.”
AGL has warned that keeping the Liddell coal-fired power station open beyond 2022 could cost more than $900m, a cost assessment shared by Delta Electricity, previously the only Australian company to have declared an interest in buying the station.
Dimery said while Liddell was an ageing facility “we think it could survive a little longer in the marketplace”. He told Sky News that Alinta Energy has a different view on the operating life of the Liddell plant and that it represented a “good commercial opportunity”.
In response, AGL said it is “relying on Liddell to generate power for our customers until 2022 and we will require its infrastructure for our replacement plans into the future”.
“AGL received an approach from Alinta last night expressing an interest in entering negotiations to acquire the Liddell power station. No formal offer has been received.
“Should a formal offer for Liddell be received, it would be given consideration in order to meet our obligations to customers and shareholders.”
Dimery said Alinta would make a nonbinding bid by April, followed by a period of exclusivity for due diligence and would like to take possession of Liddell by September if AGL agrees to sell it.
He said it could contract with AGL to provide energy from Liddell until 2022 to satisfy its need for power until then, suggesting this was “not a deal-breaker for [Alinta]”.
Dimery said it was “only interested in this transaction if it is commercial”, rejecting the need for government subsidies.
On Tuesday several MPs contacted by Guardian Australia confirmed their membership of the Monash group, including Nationals John Williams and Ken O’Dowd and Liberal MP Ian Goodenough.
While the policy manifesto of the group queries why the government does not commit to a new coal-fired power station, dubbed Hazelwood 2.0, at a cost of up to $4bn, the position of individual members on subsidies varies.
Goodenough said he “would not generally advocate” subsidies for any form of power generation, while Kelly suggested government assistance may be required, and Williams said the government should compulsorily acquire Liddell and onsell it if AGL refused.
On Tuesday Malcolm Turnbull and Josh Frydenberg stared down pressure from the Monash Group to provide more support for coal power.
At a press conference Turnbull said the national energy guarantee (Neg) provided “every incentive for the energy sector to invest in dispatchable power”.
He said the Neg “puts a premium on dispatchability” which can be provided by coal, gas and hydroelectric power.
John Williams, a retired engineer who was head of the program to extend the life of coal power stations at Pacific Power, told Guardian Australia that “costing the life extension of a power plant is an expert’s job, not a politician’s job”.
Williams warned that extending Liddell’s life would only work for “a very limited period of time and it would be at a higher risk” throughout its operation.
He cited metal fatigue resulting in higher rates of “catastrophic failure”, including breakage or explosion of the plant’s impeller.
“Anybody who decides to push on, as AGL has now discovered with Liddell, there’s an end point to this,” he said.
“[AGL’s] costing to extend another five years is shown to be more expensive than replacing the plant and putting in new technology.”
Energy ministers will meet in Melbourne on 20 April to discuss the Neg policy.